Gitlab Shares Down Despite Q3 Earnings Beat, Revenues Up Y/Y

Core Insights - GitLab reported third-quarter fiscal 2026 non-GAAP earnings of 25 cents per share, exceeding the Zacks Consensus Estimate by 25% and up from 23 cents per share in the same quarter last year [1] - Total revenues reached $244.35 million, surpassing the consensus mark by 2.41% and reflecting a 25% year-over-year increase, driven by strong demand for its DevSecOps platform [1] Revenue Breakdown - Subscription revenues, which include self-managed and SaaS, accounted for 91.4% of total revenues, increasing 27.4% year over year to $223.3 million, beating the Zacks Consensus Estimate by 3.92% [2] - SaaS revenues contributed 31% to total revenues and surged 36% year over year, fueled by the adoption of GitLab Dedicated, AI integration, and expanding customer engagement [2] Customer Metrics - Customers with more than $5K of Annual Recurring Revenue (ARR) rose to 10,475, a 10% increase year over year [3] - Customers with more than $100K of ARR increased to 1,405, up 23% year over year, indicating GitLab's success in attracting and retaining large enterprise customers [3] - The dollar-based Net Retention Rate was 119% in the reported quarter [3] - Total Remaining Performance Obligation (RPO) surged 27% year over year to $1 billion, with current RPO increasing 28% year over year to $659.1 million [3] Operating Expenses - Non-GAAP research & development expenses rose 13.2% year over year to $53.2 million [4] - Sales and marketing expenses increased 12% year over year to $87.6 million [4] - General and administrative expenses grew 17% year over year to $32 million [4] - Non-GAAP operating income was $43.7 million, compared to $25.9 million in the year-ago quarter [4] Financial Position - As of October 31, 2025, cash and cash equivalents and short-term investments totaled $1.20 billion, up from $1.16 billion as of July 31, 2025 [5] - Cash flow from operations for the reported quarter was $31.4 million, down from $49.4 million in the previous quarter [5] - Adjusted free cash flow was $27.24 million, compared to $49.4 million as of July 31, 2025 [5] Future Guidance - For the fourth quarter of fiscal 2026, GitLab expects revenues between $251 million and $252 million, indicating approximately 19% year-over-year growth [6] - Non-GAAP operating income for the fourth quarter is expected to be in the range of $38-$39 million, with non-GAAP earnings projected between 22 cents and 23 cents per share [8] - For fiscal 2026, GitLab anticipates revenues between $946 million and $947 million, reflecting a growth of approximately 25% year over year [8]